Event: Jennifer Westacott interview with Alicia Barry, The Business
Speakers: Alicia Barry, host; Jennifer Westacott, chief executive Business Council of Australia
Date: 4 March 2021
Topics: Three steps to reopen Australia’s economy, vaccine roll-out, COVID economic recovery
Alicia Barry, host: Jennifer Westacott, welcome to The Business.
Jennifer Westacott, Business Council chief executive: Thanks very much.
Alicia: The December GDP data shows Australia's economy essentially recorded a V-shaped recovery. Is it fair to say this was largely due to stricter closures and lockdown measures which saw the virus kept under control?
Jennifer: Well, I think what we're seeing is a recovery that's very strong, stronger than everyone expected. I think what we're seeing is as we release from these restrictions, the economy bounces back and people get back to a whole lot of activities, and you can see that in the Victorian numbers, where the growth is very strong. Look, I think there's a couple of comments to make about the national accounts. A, they're very good, shows the economy's resilient. There is also though, the challenge about how we keep momentum. So we've got a lot of consumption, about 70% of the numbers driven by consumption. We've got an uptake, an uptick rather, in business investment, which is great, it shows that incentives work. The challenge, I think, is how we sustain this, how we keep the momentum on reopening the economy and how we deepen, particularly business investment. So particularly, to pull it through across the economy, to these big projects that will have both the job creation effect and also a big effect in lifting the performance of the economy.
Alicia: What will further spark long term business investment?
Jennifer: Well, you've got to get the incentives right. We've been calling for an investment allowance for many years. The expensing measures that the government put into the budget last year, clearly work. And you can see that particularly in machinery in the numbers yesterday, and that shows these things work. I think the challenge is to get it across the whole economy, particularly get it to the large companies which have got the big balance sheets to get them doing more of those transformative projects, whether it's in energy, whether it's in retail, whether it's in housing or logistics. Getting those big companies included, I think is a start, and then there are other things around confidence, so maintaining the momentum in the economy, not going back to stop-start lockdowns. That gives companies confidence to make those investments.
Alicia: When it comes to these types of lockdowns that you're referring to, it seems that health policy directives were linked with strong economic outcomes.
Jennifer: There's no doubt our capacity to keep this under control has been a huge boost to our capacity to keep the economy from really falling to the numbers we've seen in other countries. And of course, to give us that floor to bounce back, but what we're calling for now, in the report we released this week, is that as the vaccine rolls out, particularly as you get to the vulnerable people, the high risk workers, the critical care workers, that we start to think about a national planned approach to releasing more activity. Because you can see, when you release the activity, the economic activity follows. Some things like caps on venues, but of course, particularly a permanent change to state borders and that is permanently staying open. Once you get to what's called 1B, when you've done the vulnerable people in the country.
Jennifer: Now obviously you have to manage this in a risk approach, but we really think that is going to be hugely important for business confidence, for consumer confidence, for tourism, and 50% of Australians are not travelling. Not because they're worried about the virus because they're worried about not being able to get home. So, that's the kind of momentum we need to build.
Alicia: The federal government has quite strict international border closure policies. Why can't the states do the same when it clearly has powers to do so?
Jennifer: Well, that's an excellent question, we've been asking it for many months. We do not believe that state border closures are the way to manage this. We think there was a very sensible local hotspot definition. We think New South Wales has been a standout example of managing outbreaks, managing tracking the tracing, without having to shut their border or go into these major lockdowns when there are actually less than ten cases. We think they've been the standout example and we look at their economic performance, it shows that.
Alicia: So do you want the federal government to step in and force the states to give up their powers?
Jennifer: Look, I think that these things have to be done by a group. I don't think that the Commonwealth is able to do that, I'm not sure of the constitutional capacity to do that, but I don't think you want anybody carrying the big stick here. I think this has to be done through the consensus arrangement through national coverage, which has worked extremely well, and has served the country extremely well. And that's why we've got the base and the economy to bounce back and to grow, and so we would encourage people to use some common sense to say well, okay, we'll roll out the vaccine, but let's see what four activities we can release, and then ultimately obviously with infection control in our quarantine maintain vigilance in our international borders, getting things like international students happening again. Getting some of those highly tri-skilled workers to come to Australia. Those things have to run alongside the vaccine's rollout. Otherwise, we run the risk that we don't bank the gains of the huge effort we've had in health management.
Alicia: Qantas boss, Alan Joyce said last week that international flights will be in the air from Australia by the end of October, contingent of course on the vaccine rollout. Isn't this up to governments though?
Jennifer: Well, I think it will be up to the government, but you should, for an airline you've got to plan these things long in advance. I mean, you've got to look at the timetable of the vaccine. You know, it takes about six months to kind of plan an airline schedule, and I think people forget that, it's not like starting up the car in the garage, you actually got, you know, a pretty big logistical thing to manage there. So I think Alan's right from his specialist point of view to say, this is when we would like to be kind of targeting that, and then obviously it's up to government. But again, I come back to the vaccine's the opportunity to start sending those important signals to business.
Alicia: When you look overseas, the virus is still rampant in many places, even as the vaccine rollout is under way. Is there a risk that Australia opens its international borders too soon risking all of the good work we've done so far?
Jennifer: Yeah, look, I think that's absolutely where you've got to kind of maintain that absolute vigilance, and that's why, you know, it may well be the governments decide that you've got to be vaccinated before you come here. And that's perfectly open for governments to make that decision. You may need some risk-based quarantine. You may have to, as we're calling for in our report, to look at vaccine uptake, where you've got countries with comparably, low levels of community transmission with high vaccination take up rates. This has all got to be based on that kind of risk approach that I'm talking about, where you look at the risk and you make a set of decisions about that risk. But you're right, I mean, if we were just to kind of open things up now, we run the risk that all of the hard work is done. But similarly, if you don't plan to open, you run the risk at all the hard work still doesn't mean you get that big economic uplift that you should get from all the terrific things we've done as a country.
Alicia: Well given Australia's economic and health management of the COVID crisis, do you expect this quite a lot of pent-up demand to come here? I hope so because you want to kind of bank again from this incredible management that we've had, but that we know won't be forever. That window will close.
Jennifer: You know, if you sort of take all the data which shows that sort of mid-2022 a lot of international community will be vaccinated. Now we've got a window there and that's my call for a plan so that we can start to send that signal to high-skilled workers, to international students, that Australia is a safe place, to companies, to think about actually, I might set my activity up in Australia. Why wouldn't we kind of target that. We've got to make sure that we're developing a plan that sends that signal, that people can start planning around that's not going to happen in a 24 hour notification. You've got to start sending the signals now.
Alicia: Well, going back to the strong GDP data out for December. It wasn't a broad brush recovery though, despite the bounce, many sectors are doing it tough. What are you anticipating the government will do when JobKeeper ends at the end of this month?
Jennifer: Well, this is why JobKeeper has to end, it was always a temporary measure. It was a nation saving initiative of the government. It's been incredibly effective at keeping people attached to the employer, but it does have to come to an end, it's also had a lot of distortional effects. So, what are we expecting, well we want, obviously some targeted industry systems.
Alicia: Should any new Government support for businesses to be targeted along geographic or industry lines?
Jennifer: I think it's got to be industry based and you know, government's obviously working that through with the target industries, aviation, tourism and you know, clearly there are some place-based effects, but they are industry related. So I think the easiest way to do it as kind of like a vertical stream, looking at a particular industry and doing it that way. But look, government has shown all the way through here that they're responsive, they're listening, they're consulting with industry and while I'm pretty confident they will do is have some home targeted actions and assistance to particular industries.
Alicia: Jennifer Westacott, we appreciate your time, thank you.
Jennifer: You're very welcome, thank you.